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January 07, 2004


Mark Bahner

Hi James,

Apparently, Ida May Fuller was born on September 6, 1874.


And she apparently died in 1975:


"Nevertheless, she received monthly Social Security checks until her death in 1975 at age 100. By the time of her death, Fuller had collected $22,888.92 from Social Security monthly benefits, even though she had contributed only $24.75 to the system. This is roughly an annualized return of 22%."


"It was necessary to build up funds before benefits could be paid out. Finally, on January 31, 1940, the first Social Security check was issued. It went to Ida M. Fuller, a retired law clerk. She had paid into the system for three years; together with her boss's contribution, a total of $44.

Her initial monthly check was for $22.54. This was increased in later years through cost-of-living adjustments.

Ms. Fuller collected monthly checks for thirty-five years, dying in 1975 at 99. In that period she had collected $20,884 in benefits. Obviously those thousands did not come out of Ms. Fuller's account."




Peter Namtvedt


We have all been living with the risk of our Social Security contributions earning nothing. We have now seen that risk come true.

Modern thinking about cost says you cannot eliminate the risk of everything. If you spend your money on item A, you forgo item B.

We have forgone the opportunity of stock-market-based earnings of about 9% for the entire life of the Social Security program in order to ensure security. Yes, preserving your capital is number one at age 80, but taking a little risk at age 20 to 55 for the probability of real earnings is what rational people do. But with the aid of our government, the certainty of earning 3% (about equal to inflation) was mesmerizing.

We are getting that return, but our grandchildren won’t get that. There are no earnings!

What you pay in to the SSI each year goes to pay retired people today. All excess contributions are borrowed by the Federal Government for general fund purposes, and that loan earns just 3%.

What our grandchildren will contribute will NOT be enough to pay the promised benefit to retired people 20 years from now.

I make an extensive quote from Mark Bahne at typepad.com:

"A fraudulent scheme. It is a specific form of pyramiding in which money paid by later investors or contributors is used to pay inflated returns to earlier investors — until the funds dry up because no more contributors can be found."

Now, is Social Security a "specific form of pyramiding in which money paid by later investors or contributors is used to pay inflated returns to earlier investors--until the funds dry up because no more contributors can be found?"

Well, duh! Yes, that's exactly what Social Security is!

The initial contributors to Social Security got absolutely astounding returns on their "investments." Here is what happened to Ida May Fuller, the very first person to receive a Social Security payment:

"Ida May Fuller worked for three years under the Social Security program. The accumulated taxes on her salary during those three years was a total of $24.75. Her initial monthly check was $22.54. During her lifetime she collected a total of $22,888.92 in Social Security benefits."

Ida May Fuller, first big winner in the Social Security Ponzi scheme.

That is an absolutely perfect example of a pyramid scheme: the very first contributor gets a better deal then any other later contributor. But this wasn't just true of Ida May Fuller...the average return on "investment" was tremendously good for the first generation of people to retire on Social Security...because they essentially paid in nothing, and got back payments from the later generations.

But what about the Trust Fund?

Some people who claim that Social Security isn't a Ponzi scheme point to the Social Security "Trust Fund:"

Paul Krugman pretends there is a Trust Fund.

But the "Trust Fund" is a sham. It has no real assets. It contains slips of paper (or electrons) that donate obligations to TAX...not true assets. As a matter of law, Congress does NOT have a legal obligation to actually raise the taxes as necessary to meet the those obligations. The "funds" in the "Trust Fund" essentially have no effect whether people who are paying into Social Security right now will get the money they pay in now out in the future. (Let alone with any "return on 'investment'"!)


Social Security IS a Ponzi scheme.

From the SEC:

"Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period - and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons.”

The US government proposed essentially the same game to the American people, only on a longer time-frame, with fuzzier and less detailed terms. They may in their Socialist dreams have been sincere, but they were at best sincerely wrong.

The whole plan counted on a growing population of workers relative to retired people. What went wrong? The assumption was that everyone died soon after age 65 – the SSI benefit age.

Average longevity is now nearing 90 years.

The net growth of contributions vs. benefit payouts has now reached $200 billion, but will fall significantly in the coming generation because of the longer lives of the retired among us.

Besides that, there is not real fund there, and no real surplus. It has all been loaned out – at the cost of probable market earnings of 9% minus the bond rate of 3%. Hmm . . . let me see, what we contributed earned SSI 3%, and then was borrowed by the government and replaced by debts on which the government has to pay 4 ½% (30 year bond rates).

Come on! This is criminal!

We only need to begin now with a choice for people 50 years or younger to eventually end that charade.

The government has a mass of assets that could be sold, yes, privatized to get through the transition period. We must do something soon before the Ponzi scheme collapses.

Jim Meek

Not having much time to write, I'll just second Clay Kimber and add a few points:

1. The fact that Social Security is financed largely on a pay-as-you-go basis does not make it any less valid as an insurance program. Many valid forms of insurance are financed on an essentially pay-as-you-go basis. Is auto vehicle insurance a Ponzi scheme? Since the goods and services to be consumed by future retirees must be produced in the future, pay-as-you-go is in fact the best and most honest way to fund Social Security.

2. If the rosy projections for economic growth seen elsewhere on this web site are correct, then there will be little difficulty in paying Social Security benefits at levels comparable to today's. If they are not, then benefits will have to be lower, but the system will not collapse. Part of the supposed "crisis" is that people are living longer. Simply raising the retirement age to reflect that fact, at a rate that will keep the worker-retiree ratio roughly constant, will allow the system to continue forever with the same fraction of the populace drawing benefits.

David Heinrich

Just because the US government doesn't promise a certain rate of return doesn't mean SS isn't a ponzi scam. SS is using exactly the same setup and dynamics as a Ponzi scam, thus it is, whether or not the government promises certain returns. Simply by promising or implying the stability of social security, the bureaocrats are lying, because the system is bound to collapse unless we maintain an extraordinary rate of population growth (which would only push the problem into the future, and make it all the more severe for future generations); a growth rate that high would also have other problems, which would far outweigh the "benefits" of maintaining "social security". The average 18-year old worker today will contribute ~$700,000 into SS and get out ~$100,000. Any private sector operation that fared this poorly would go bankrupt. People would be much better off if they were allowed to choose what to do with *their own* money. If they invested it with average skill, they would most likely have significant rates of compounding, and at least maintain their original investment.

brady byrum

There being no Social Security Trust Fund, and there being no money in it, (Oh yeah, I learned it was bankrupt back in 1991 by the Congressional Research Service in their report of the insolvency then) then can anyone explain to me why any company I apply at, is willing to violate 42 USC 408 to deny me an ability to support my family, for not flushing half my pay down an empty hole, by participating in a ponzi scheme that is already hollow, and that doesn't even exist in the first place?

FURTHERMORE, back in 1991 I nullified my SSN, by affidavit in public record, for FRAUD, MISREPRESENTATION, LACK OF FULL DISCLOSURE and INFANTCY, and havent paid a dime into it since then.

But now we have criminalized the lack of a number. Here's how. I cannot get my automobile registered, because I cannot get it inspected first, and I cannot get it inspected, because I cannot get insurance first, because here in Texas, insurance is required to be shown. I cannot get insurance because I cannot get a drivers license. Insurance requires that I show my drivers license to buy a policy. I cannot get a drivers license because NOW, the State of Texas is ENFORCING 42 USC 666, (which is for Federal Territories only, but the ignorant Texas bureaucRATS believe it includes Texas), which now requires the collection of SSN's from those who are applying for "benefits". Even though all four of these so-called offenses are "Class-C", that is FINE ONLY, the IGNORANT COPS take the offenders to CRIMINAL COURTS.

brady byrum

There are 91 trust funds created by Congress, found at 31 USC 3121. Number Two and Number Sixty-Two are the trust funds, called Internal Revenue, Puerto Rico, and Internal Revenue, Phillipine Islands. Would somebody please show me the trust fund called "Social Security Trust Fund" that these politicians keep talking about? It's not there folks! Nor is the "Internal Revenue, United States of America. Think on that one for a while. SECOND POSTING

brady byrum

Social Security is an oxymoron. It is actually Socialist Insecurity, designed to trick Americans into parting with 40 to 50% of their spendable earnings, over the average 40 to 50 working years of their lives, in trade for the hope of getting "back" 10 to 20% for 10 to 20 years. Hmmm. I can't even trick my 8 year old homeschooled girl into that same scenario with her earnings. FIRST POSTING

Clay Kimber

Sorry, I meant to post the link to the SEC text I quoted:


Clay Kimber

From the SEC:

"Ponzi told investors that he could provide a 40% return in just 90 days compared with 5% for bank savings accounts. Ponzi was deluged with funds from investors, taking in $1 million during one three-hour period - and this was 1921! Though a few early investors were paid off to make the scheme look legitimate, an investigation found that Ponzi had only purchased about $30 worth of the international mail coupons."

Social Security is clearly NOT a Ponzi scheme. If it were, it would have failed a long time ago. The US government did not back up Social Security with $30 worth of anything.

Plus, the US government never promised a 40% return rate in 90 days!

Furthermore, Ida May Fuller was not paid off to make Social Security appear legitimate. Ms. Fuller happened to be one of the first payees of Social Security, and SS was designed so that the young people of the nation are paying premiums to fund the payments of retirees.

Need proof? Workers are, by design, funding the SS payments of retirees (and the disabled, or widowed, or orphaned, etc). That's why wage-earners, and frankly SS, are in deep doo-doo when the baby boomers retire. Most agree: too many boomers, not enough workers. When that happens, there will be much less invested in SS than is payed out. Hence the problem...

It is one thing to say Social Security is unsustainable as it is. But to say that it is an "illegal scheme," as you assert, is just wrong.

No shrill-speak intended, just debate.


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